Confidence of property buyers crucial for sector to cope with economic volatility

The Thai property sector is expected to remain steady amid various challenges this year, especially the high rejection rate from financial institutions, and the impact of rising interest rate and household debt on consumers’ purchasing power, according to industry insiders.

The high interest rate has pushed up the price of construction materials, resulting in higher cost of project development.

“The interest rate is an important factor as a 1% rise could result in a 7-8% decline in people's purchasing power," said Uthai Uthaisangsuk, the chief operating officer of Sansiri Plc,.

However, Thailand’s tourism recovery and the government's economic stimulus measures are expected to help boost the growth of the property sector this year.

Developers bank on Chinese buyers

Apart from Thais who have stable income with no credit problem, groups of foreigners could help boost property sales in Bangkok, including those from Singapore, Hong Kong and Myanmar, say experts.

Many Burmese have started to purchase condominiums in Thailand as assets to diversify risk from the political conflict at home, showing interest in units in the 3-5 million baht range.

Condominium sales in the capital are also expected to gain positive sentiment from the Thailand-China free visa policy set to be effective from March 1. However, the policy would not help stimulate sales much due to the Chinese government’s policy to stimulate domestic tourism amid their economic slowdown.

Chinese people also were uncertain about the reliability of Thai developers, including whether the property prices they were being offered the same price as Thai people.

“Building confidence is important if property developers want to attract Chinese customers,” said Knight Frank’s managing director, Nattha Kahapana, adding that Chinese people often visited Thailand to check the quality of condominiums on site.

Russians flock to Phuket

Russian people have become top buyers of properties in Phuket, one of Thailand’s top tourist destinations which has been dubbed “The Pearl of The Andaman”, with a 50/50 of the purchase for investment or living.

Russian people have shown interest in owning pool villas which are easy to manage compared to condominiums because contracts to purchase pool villas should be made before the construction begins.

“Even though sales cannot surge, the property market in Phuket can expand steadily,” Nattha said.

Opportunities in the EEC

Unlike in Bangkok, property projects in the Eastern Economic Corridor (EEC) have gained attention among Thai labourers and foreign expats who work near industrial estates, especially those in Chonburi and Rayong provinces.

The projects also gained positive sentiment from government and private investment in mega-projects and smart city development, as well as the influx of new industries like electric vehicles.

Singha Estate plans to launch a mixed-use project in the Sriracha district of Chonburi province. The project consists of condominiums, office buildings, retail areas and townhomes targeting Thais and foreigners in EEC.

"We want to create facilities to support locals in the area, such as a lawyer office for expats," said company CEO Thitima Rungkwansiriroj.